How an Incredible Lease Deal on a Chevy Bolt EV Saved Me $4,000

It’s been a busy week for Mr. Clever Fox: I signed up for a credit card with a $1,000 bonus, took steps towards earning $1,200 in banking bonuses, and most significantly, I’m delighted to share that I just took delivery of a brand new 2020 Chevrolet Bolt EV! Not only that, but I leased it.

I’ve wanted to have an electric car for years, but circumstances and prices had prevented that. I would love to gush about why I like electric cars in general and the bona fides of the Bolt in particular, but in this post, I’m going to talk to you about the financial decision. 

Because rest assured if someone came up to me and said, “I’m thinking about replacing my two-year-old car, which I only recently purchased and which has no problems, with a new car that I plan to lease,” alarm bells would be ringing in my head. The conventional wisdom is clear that this is a terrible financial move. But it wasn’t terrible in this case. It was profitable to the tune of $4,000.

So here are the two questions this article will answer:

• How do you go from a car with a $42,000 price tag to a lease that costs $145 a month, all taxes and fees included?
• And even if you can get a lease that low, how could that possibly be better than keeping the car you have?

Part 1 – Getting a feel for the price

The Bolt, introduced in 2017, was one of the first non-Tesla cars to have more than 200 miles of range, and the 2020 model takes that to 259 miles. The car is well-equipped, comfortable, and fun to drive.

The Bolt comes in two trims, plenty of colors, and several optional packages. I was happy with the base model, and the only must-have package for me was the DC fast charging capability. It’ll turn out that I wound up with a fully-loaded car (see “Negotiating the deal” below), but I started the process focused on the cheapest Bolts that met my sole requirement.

Finding the lowest advertised price

The first thing to get out of the way is that the MSRP of the Bolt, which starts at $36,620, is a fantasy. Chevrolet also understands it’s a fantasy, and you can expect the actual starting prices to be in the mid-to-upper 20s after miraculous incentives like “customer cash for everyone” are applied. The exact deals fluctuate month-to-month and differ slightly for buying, leasing, or financing.

My first goal was to find the lowest advertised price for a Bolt near me. I used cars.com to cast a 250-mile wide net around Austin, and, as is often the case, the best deals were in neighboring San Antonio. A dealer a couple of hours away had Bolts (with DC fast charging) listed for $25,000 plus taxes and fees.

Editorial note: The dealer’s price was actually $24,999. I will be rounding some of the numbers in this case study to keep the story flowing and avoid getting bogged down in the precise calculations.

Other incentives – Puzzle piece #1

GM has several standard incentives that certain people might qualify for, such as discounts for being in the military, a first responder, a teacher, a current lease-holder, etc. None of these applied to me.

However, I am a Costco member, and now through January 4th, they are offering members $3,000 off a Bolt, whether buying or leasing. With that factored in, the advertised price dropped to $22,000. 

An out-the-door starting point

I asked the dealer (over email) to give me an out-the-door number for the car, including taxes and fees. Taxes may be relatively straightforward to calculate, but “fees” can vary wildly. Luckily, the dealer was forthcoming and said the all-inclusive, final price of their Bolt was $24,200 with the Costco discount.

Tax credits and rebates – Puzzle piece #2

There are incentives at both the federal and state levels when it comes to buying an electric car.

At the federal level, the famous incentive is the EV tax credit, which is cash back provided by the government to stimulate EV sales. This program allows each manufacturer to sell a certain number of cars that are eligible for this credit, starting with a $7,500 rebate and reducing to zero. While some manufacturers still qualify for federal tax credits, Chevrolet does not. 

However, Texas currently offers a $2,500 rebate for purchasing or leasing an electric vehicle. So, for example, if you were buying the car I described above for $24,200, you could quickly put $2,500 back in your pocket, effectively making the price $21,700. 

(Side note: Many friends have said, “Really? Texas supports EVs? Aren’t they all about oil?” Actually, no: Texas is also the largest producer of wind energy in the country, and with Elon Musk opening a gigafactory in Austin, titans of industry are colliding. The future could get very exciting here!)

Some states are more generous than Texas, and some are less so. If you’re not a Texan, you’ll want to look up what your state offers, and it may shift the optimal decision if you’re thinking about purchasing an EV yourself.

Part 2 – The lease power play

I’ll admit I spent about a week just comparing two options: buy the Bolt or keep the car I have. I dismissed leasing out of hand until – if you’ll permit me to mix my metaphors – I had a light-bulb moment that hit me like a freight train.

Why did it take so long?

Conventional wisdom isn’t always right

When it comes to financial discipline, there are many best practices to save money, but there are also exceptions to every rule. For example, I recently wrote an article on why you should always buy generics, but the last time I was buying batteries at the grocery store, an in-store coupon on the name-brand made it the better deal at that moment. It always pays to pay attention.

One piece of conventional wisdom is that leasing a car is a poor financial decision. You’re paying for the most expensive first years of a car’s life and left with nothing in the end. Indeed, when it comes to car buying, you’re usually better off in this order:

• Sticking with the car you have (until it’s falling apart)
• Buying a reliable used car (and running it into the ground)
• Buying a new car (and running it into the ground)
• Leasing a car

The belief that leasing was obviously a poor choice was so ingrained that I was almost a week into evaluating whether to buy the car before I looked at leasing critically. When I did, I realized that I was in an “exception to the rule” situation:

Both the $3,000 Costco incentive and the $2,500 Texas rebate were available when buying or leasing an electric car. Applying these incentives to a lease was a game-changer that completely upended the usual math.

The lease numbers

I wrote back to the dealer and asked what their price would translate to as a 36-month, 10,000 miles a year lease, factoring in the Costco incentive. I again asked for an out-the-door price that included any other fees, such as down payment or disposition fees. The reply: $209 down, $209/month, and no additional costs whatsoever (aside from potential excess mileage and excess wear and tear fees, which is customary).

$209 x 36 = $7,524 (let’s just call it $7,500).

The Texas $2,500 rebate does not factor into the dealer’s offer. A buyer applies for the money from the state after the sale. But collecting that rebate meant the lease’s effective total cost would be $5,000, or about $140 a month. Put another way, I’d still be paying the dealer $7,500 over three years, but I’d also receive $2,500 from the state.

$5,000 of payments on a car whose purchase price would have been $21,700 represents 23% of the car’s value, which is an excellent price to buy the first three years of its life. And as you’ll see shortly, it’s less money than I would have paid to keep my current vehicle.

Negotiating the deal

Since the dealer with the low advertised prices was a couple of hours away, my wife and I decided to test drive the car at a local dealer. We’d driven a previous-year model before, but we wanted to make sure we loved it as much as we’d remembered. We did, and after the test drive, the local dealer was naturally eager for our business. This dealer’s advertised prices were thousands of dollars higher, but they insisted they would not be beaten on price.

At this point, we did two important things. First, we shared the numbers the other dealer had provided, and second, we went home. 

When buying a car from a traditional dealer, you should never take the first offer you see, and if you can get dealers to compete for your business, that competition almost always works in your favor. We knew exactly what car we wanted to buy, including which packages mattered to us and which didn’t. A good strategy in this situation is to work with a few dealers over email or the phone, letting them know you’re ready to buy, but you won’t be coming in unless the price is right. You’ll rapidly find sharp minds and sharp pencils.

Long story short, the local dealer offered up a fully-loaded version of the car for $5 a month more ($145 effective lease), which I was happy to pay.

Part 3 – But wait, I already had a perfectly good car

I currently own a 2018 Chevrolet Cruze. It’s the epitome of a practical car. While certainly not flash, it’s fuel-efficient, reasonably full-featured, and has modest maintenance costs. It has about 31,000 miles on it and won’t be out of warranty until next year. I had just bought it in March from Hertz (buying an ex-rental car can be a great way to get a lower price on a newer car, but that’s a subject for another post). Long story short, it was a new car that had nothing wrong with it. Should I have kept it?

Cost of ownership

To answer this question, I made some calculations about the cost of ownership for the next three years and compared the Bolt to the Cruze. Ownership costs include fuel (gas or electricity), maintenance, repairs, insurance, and depreciation.

Editorial note: There’s a bit more rounding and simplification in the analysis below.

Three years of the Bolt

The main operating cost of the Bolt is electricity. We’re all used to gasoline, and given how many miles you expect to drive in a year, the cost per gallon of gas, and a car’s efficiency in miles per gallon (MPG), you can quickly work out an annual fuel cost. You can do the same with electricity, but you have to get used to some new terms. Instead of “the cost of a gallon of gas,” you say “the cost of a kilowatt-hour of power,” and instead of “miles per gallon,” you say “kilowatt-hours per 100 miles“. Just as you can look up a gas car’s average MPG, you can look up an EV’s average kWh/100 mi.

I decided it would cost about $300 a year in electricity to power the Bolt, assuming I charged the car mostly at home. In reality, I may be able to do much better than that because Austin’s electric utility has placed public chargers around the city and has a program that provides nearly free power from them. But for the sake of this analysis, let’s assume $300/yr, or $900 total.

It turned out that my insurance costs were $20 cheaper with the Bolt, which surprised me. Perhaps EV drivers are statistically more responsible drivers?

I expect zero maintenance costs (I think one must replace the $15 air filter after two years and rotate the tires, but the maintenance schedule for an EV is almost nil) and zero repair costs because the car would be under warranty.

I don’t technically have any depreciation costs because, well, I don’t own the car, but let’s substitute the $5,000 of lease payments in for this category.

So, the total three-year cost of ownership is roughly $5,900.

Three years of the Cruze:

The Cruze needs gas, and that’s roughly twice as expensive per mile as electricity in Texas. Given the same assumption about how many miles I drive and the car’s average fuel economy, I calculated fuel would cost $600 a year, $1,800 total. It’s worth noting that gas is relatively cheap in Texas, and if you live in a state where gas is more expensive, the gap between electricity and gas costs can be much more significant.

The Cruze would also have maintenance costs. At a minimum, the car would need an oil change each year ($60 each due to synthetic oil) and new tires ($400). As the car moved into the middle of its life, it might also need other maintenance (e.g., brake pads or a new battery, perhaps). The car might also need repairs, and the warranty would be coming to an end. It’s hard to say how much repairs and other maintenance would cost, as it somewhat depends on your luck. I put $500 as a guess. Let’s round repair and maintenance costs to $1,100 and call that the likely minimum.

I then looked at depreciation. If you’re not familiar with depreciation, here’s a simple way to look at it: I decided I could reasonably hope to sell the car today for $12,500 (to a private party). On the other hand, in three years and with more mileage on the car, I guessed I would be able to sell the car for about $7,500. I arrived at this by assuming a standard 15% depreciation rate per year and confirmed my guess by checking Kelly Blue Book. And it’s worth noting that if the car were to be involved in an accident or have a major mechanical issue, making it less desirable, it could be worth less than $7,500. So in the best-case scenario, this means I believed the Cruze would depreciate (lose) $5,000 in value in three years. Or in other words, I could make $5,000 more by selling it today.

So, the total three-year cost of ownership would be roughly $7,900.

Are you ‘interested’ in opportunity cost?

If you rolled your eyes at the pun in this section heading, you might already know where I’m going with this. The numbers above show that I can expect to have about $2,000 more in my assets in three years by selling the car I have and leasing the Bolt. However, I judged the true difference in value to be closer to $4,000, and that’s due to opportunity cost.

If I sell the car I have and get cash now, I can do something with that cash. For example, I could put it in the stock market or a high-yield savings account so it can earn interest over the next three years. Some money each month would go towards lease payments, but the lion’s share would have a lot of time to grow. The exact calculations are too much of a digression for this article, but it’s worth considering opportunity cost when comparing your options.

Part 4 – Final thoughts

Should I have bought the Bolt instead?

I ran the numbers on buying the Bolt vs. leasing it and determined it was not as attractive a proposition. If you’re curious, the reason that’s the case once again has to do with depreciation and opportunity costs.

Money isn’t everything, and there’s another reason I was excited to lease the Bolt: I won’t want this car in a few years.

I believe that we are in the early-middle stages of an electric car revolution. Tesla has become the most valuable carmaker globally and is making noise about cheaper vehicles coming soon. Meanwhile, every other major automaker is getting in on the game, including GM, who is announcing new models with improved batteries and range coming in the next few years. The point is, I think the Bolt is one of the best EVs you can buy today, but in three years, it’s going to feel less capable compared to newer models. At the moment, EV technology is not a bad thing to borrow (lease) rather than own for the long-term; it’s just progressing so rapidly!

So what happens in three years?

In three years, they will take the car away. Well, to be fair, they will allow me to buy out the car, which will almost certainly be a terrible proposition. So I expect to walk away from the Bolt.

Meanwhile, all of the money I saved by selling the Cruze (and avoiding maintenance costs), plus any interest that money earns, will be ready to put towards the next car. All options will be on the table: I suspect there will be new and exciting incentives at that time, and if not, I can always jump back into a reliable used car.

There’s some hassle in knowing I’m going to have to figure out what car to get again in a few years, but that is easily offset by the exciting opportunity to step up in technology and $4,000 of savings.

Did I think of everything?

As you can see, there are many variables and best-guesses in working through a car buying question. Perhaps I could have gotten an even better deal than I did. Perhaps I’ll damage the new car and be on the hook for repair fees. Perhaps the old car would have had a major problem. Perhaps I’ll take on additional expenses, like installing a Level 2 charger at my home. Perhaps, perhaps, perhaps…

There’s a point where you have to accept some uncertainty, but I hope this case study gives you a sense of how to evaluate the financial picture if you are motivated to look into getting an EV yourself. The two main factors to calculate are what it would cost to lease or buy the new car and what the comparative cost of ownership would be between that car and the car you have now.

Your mileage may vary

Some of the variables that will inevitably differ from person-to-person are:

Where you live: This affects state-level EV incentives and what models and offers are available. If you’re in a compliance market like California, you can regularly get even better deals than the one I’ve described. On the other hand, some states might not have any incentives available.

Which car you want: This affects price, potential tax credits, and other incentives for which you may be eligible.

What’s going on with your current car: Your cost of ownership calculations will be unique, and whether you own your vehicle outright or are financing/leasing it affects how much money you’ll get by replacing it.

I’m sure other variables and points of difference will occur to you as you think through your personal situation.

Join the movement

I’ll end by saying that I’m thrilled to own an EV. I think they’re incredibly cool machines and also represent a move towards a more sustainable and technologically advanced future. I would have been willing to step into the EV lease even if the financial picture had been slightly unfavorable, but it was delightful to discover this was a profitable move.

I hope this article inspires you to consider buying an EV, and I’m happy to talk through questions in the comments!